United States: FTC Constitutional Challenge Update: Fifth Circuit Delivers Illumina A Stocking Full Of Coal

Last week, the Fifth Circuit handed down an across-the-board rejection of four constitutional challenges raised by gene sequencing company Illumina in defending against the Federal Trade Commission's merger challenge. Bah! Humbug!

In previous years around the holiday season, we've had better news to report to those under the FTC's thumb. With our coverage of the panoply of constitutional challenges that the FTC has been facing recently, there was a chance that tradition would continue. Alas, that is not the case with the Fifth Circuit's decision in Illumina v. FTC.

First the Fifth Circuit rejected Illumina's argument that Congress impermissibly delegated legislative authority by allowing the FTC to choose whether to bring enforcement actions in federal court or in an administrative proceeding. Specifically, the Court based its reasoning on the fact that the FTC's authority under Section 13(b)—providing for federal action to obtain injunctive relief—and its authority under Section 5(b)—providing for administrative action, after which the FTC can obtain monetary relief such as damages—are two separate and distinct enforcement mechanisms.

As the Court concluded, these unique aspects of the two statutory authorities provide enough guidance to the FTC from Congress, avoiding an impermissible delegation of legislative authority. The Court also noted that the statutory authority to bring an action "in the interest of the public" is a sufficient intelligible principle for the FTC to exercise any delegated legislative authority.

The Fifth Circuit then also rejected Illumina's challenge to the FTC commissioners' exercise of executive authority, while being insulated from presidential removal, as required under Article II of the Constitution, as unconstitutional. Though the Fifth Circuit acknowledged that the U.S. Supreme Court has recently cabined the reach of its 1935 decision in Humphrey's Executor, and that the FTC's powers may have changed since 1935, the Fifth Circuit felt Humphrey's Executor was still binding precedent.

Similarly, the Fifth Circuit rejected Illumina's argument that the FTC violates due process by serving as both prosecutor and judge in administrative proceedings. Relying on prior Supreme Court and Fifth Circuit precedent, the Court noted that administrative agencies routinely investigate, prosecute, and adjudicate rights without violating due process, and only evidence of "actual bias" raises due process concerns.

Finally, Illumina's equal protection challenge, arguing that there is no rational basis for divvying up antitrust enforcement between the FTC and the Department of Justice with different procedural regimes, suffered a similar fate. The Fifth Circuit determined that, since the FTC and DOJ have an "interagency clearance process" allocating enforcement to the respective agencies, the incredibly low bar of rational-basis review is met.

As a new year approaches, we will continue to keep a watchful eye on any further developments in the challenges to the FTC's authority. In the meantime, enjoy the holidays!

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